Food Corporation India invites bids for short term loan of Rs 20K crore

FCI had food subsidy dues of around Rs 50,000 crore at the end of financial year 13-14. It has written to the government about its financial position.

NEW DELHI: Facing liquidity crunch, the Food Corporation of India has floated a tender inviting bids for short term loan of Rs 20,000 crore to meet the working capital requirements.

FCI had food subsidy dues of around Rs 50,000 crore at the end of financial year 2013-14. It has written to the government informing about its financial position in the first week of April, sources said.

In 2013-14, the government provided Rs 75,500.02 crore as subsidy to FCI, while subsidy incurred during the year was at Rs 1,03,791.85 crore. The total subsidy arrears, including arrears carried over from the previous years amounted to about Rs 50,000 crore.

The tender, floated on April 24, will close on April 30. "To meet its short term fund requirement for procurement and distribution of foodgrains, the corporation is considering raising short term loans from the scheduled banks only for 90 days tenure on unsecured basis," FCI said in the tender.

FCI has fixed the minimum quote for an amount of Rs 250 crore and tranche size has been kept at Rs 20,000 crore.

The corporation takes short term loans from various scheduled commercial banks normally at base rate.

"Rate of interest quoted is to be linked with the base rate of the bank quoting the plus/minus to the base rate to arrive at the effective rate at which the offer for short term loan can be extended to FCI," says the tender.

Banks can bid for different tenures but corporation reserves the right of selecting the right tenure.

Besides short term loan, government has also sanctioned cash credit limit of Rs 54,495 crore to FCI on secured basis, which it can avail from the consortium of 62 banks in lieu of its stock of grains.

Meanwhile, in the last fiscal the government had also allowed FCI to raise Rs 8,000 crore from the market via long term bonds, which the corporation has already raised in the last fiscal.

The government pays bulk of food subsidy to FCI as it is the nodal agency with the primary task of purchasing and ensuring effective prices to farmers.

It also ensures required supply of food grains at cheaper rates throughout the country.

FCI's arrears have risen sharply in the last few years due to increase in the minimum support prices (MSP) for foodgrains as well as high procurement, storage and distribution costs.

The economic cost which is total of MSP, procurement storage and distribution costs for wheat and rice was at Rs 1,494.35 per quintal and Rs 1,983.11 per quintal respectively in 2010-11.

It rose to Rs 1,932.39 per quintal and Rs 2,638.54 per quintal respectively in 2013-14.